Ireland PM vows new fund structure by end of year

The new vehicle allows for tax treatment as a fund in the US and is immune from recent reforms to Irish corporate law.

Irish Prime Minister Enda Kenny pledged to implement a bill creating a new fund structure that is “set to revolutionise the Irish funds industry”, according to a statement from the Irish Funds Industry Association (IFIA).

Speaking at the IFIA’s global conference on Tuesday, Kenny said he aims to have the new Irish Collective Asset-management Vehicle (ICAV) up and running by end of year.

The new vehicle “will open up the Irish investment fund market to new participants, providing new solutions for managers who use Ireland,” said Kenny. Over the last two decades Ireland has reformed its corporate and tax law to position itself as an attractive destination for fund managers. Roughly €1.4 trillion-worth of capital now sits in funds domiciled in the Emerald Isle.

The ICAV structure is a corporate vehicle designed to sit alongside the public limited company (plc) which has been the most popular of the existing Irish collective investment fund vehicles. Existing funds established as plcs will have the option to convert to ICAV status.

The benefits if an ICAV is that it will not be impacted by amendments to European and domestic company legislation that are targeted at trading companies rather than investment funds – unlike the current plc structure.

An ICAV will also be able to elect its classification under the US check-the-box taxation rules. The Irish plc is not currently permitted to check-the-box for US tax purposes, meaning that it is treated as a separate entity and subject to two levels of tax: one at the corporate level where the income is earned and the second at the shareholder level when distributions are made. As an “eligible entity” an ICAV can elect for alternative, more favorable tax treatment, Liam Collins, Dublin-based funds partner for law firm Matheson, told pfm.

The Irish Central Bank also provided a boost to the private debt industry by declaring that it will issue a public consultation on loan origination funds. Ireland’s securities regulator intends to add a chapter to the Alternative Investment Fund Rulebook to provide a regulatory framework for loan origination funds.

“This consultation will take the form of a draft chapter to the Central Bank’s AIF Rulebook and aims to ensure that the risks of loan origination by funds are monitored and mitigated whilst opening up this potentially valuable channel of funding to the real economy,” said at the conference Gareth Murphy, director of markets at the Central Bank of Ireland.